SARASOTA:

Packing downtown with more people

SARASOTA - It's no surprise immense growth is coming to downtown Sarasota, but the comprehensive picture of new hotel and residential development entails staggering increases headed to the heart of the city in coming years.

City economic and planning leaders detailed planned development for the Downtown Sarasota Condo Association on Tuesday night, amid several questions from downtown residents about just how much growth the city can stomach.

For starters, hotel projects under construction or approved by the city will add 1,000 more rooms to the nearly 2,000 already in the downtown area, said Virginia Haley, president of Visit Sarasota County.

That will mean the city must generate about 125,000 additional visitors each year to sustain its current occupancy levels, she estimates.

"Before anybody complains about traffic, let me share with you that my hotel occupancy on weekends in July is the same as it is in March," Haley said. "But I don't have a lot of traffic complaints in July, because our seasonal residents aren't here."

But the number of residential units, either rentals or condominiums, will increase by even more, said Norm Gollub, downtown economic development coordinator for the Greater Sarasota Chamber of Commerce.

About 6,500 residents live in about 4,100 downtown apartments and condos now, he said. More than a dozen additional projects on the way will add another roughly 3,200 residential units to the area, possibly bringing as many as 5,700 new residents downtown, he estimated.

“Much of this is the result of pent-up demand from the recession," Gollub said. "I don't honestly know how much. Once some of these projects are complete, market demand will drive the other projects, but we'll see.”

A U.S. Census Bureau study released last week revealed the Sarasota metropolitan area is the 11th-fastest growing metro area in the country, with Sarasota and Manatee counties adding more than 20,000 people between mid-2014 and 2015.

Last year, the city of Sarasota processed a record number of building permits — about 8,400 permits with a total construction value of about $350 million, said Gretchen Schneider, the city's general manager of planning and development. Many of those are single-family home renovations that owners are now able to tackle as the economy rebounds, and the city is already on track to break that record number of permits again this year, she said.

Despite the surge, Sarasota is only just now approaching its pre-downturn population of about 55,000 residents.

"We're still not back to where we were in '07," Schneider said. "Yes, it's increasing, but it's not going to go gangbusters."

All that growth has caused its share of issue and consternation among local residents, who most often gripe about traffic congestion and the changing skyline. But the city and Sarasota County are working through those issues, with plans to add more than a dozen roundabouts throughout downtown to eliminate lengthy traffic signals and re-instituting suspended impact fees to try to fund improvements and slow the rate of growth.

"Sarasota is becoming an urbanized community with the rules put in place 20 years ago that allowed this," Gollub said. "What's being done now is the struggle of keeping the community vibrant and alive, not overwhelming. ... It's not the Sarasota of our youth, but with our help, our guidance and our input, we can make it the Sarasota that's sustainable."

Developers have started canceling projects, slashing prices and offering incentives such as private-jet access to spur sales, an ominous echo of the housing crash that pounded South Florida especially hard.

Easy financing and rising prices prompted developers to build about 21,000 condos in the downtown Miami area from 2004 to 2008. Many of those units sat empty for years.

Developers say this time they have insulated themselves by requiring buyers to put down 50% deposits by the time buildings break ground and by canceling projects instead of moving forward as the market slows.

Still, it may not be easy for some to sidestep the damage. In the fourth quarter of 2015, the number of Miami Beach condo transactions declined nearly 20% from a year earlier, while inventory jumped by nearly a third, according to a report from appraisal firm Miller Samuel Inc. The median sales price slipped 6.6%, according to the report.

“The condo market has peaked,” said Neisen Kasdin, a real-estate development lawyer at Akerman LLP in Miami. “Sales velocity has slowed down considerably.”

Many of the forces buffeting the Miami market are also hitting luxury markets in New York, Southern California, Australia and London. A strong U.S. dollar and weakening local currencies, dropping oil prices and global economic turbulence have crimped the buying power of foreign investors.

At the same time, stock-market turbulence has made wealthy locals hesitant to undertake big purchases. Luxury-home prices in 10 global cities analyzed by broker Knight Frank LLP are expected to increase by 1.7% this year, down from 3% growth in 2015.

Carlos Rosso, president of condominium development at Related Group, Miami’s largest condo developer, said he sells about 20 units a week in the Miami-Fort Lauderdale area, versus about 100 a week last year. In response, the company priced its new Auberge development, a 60-story project in downtown Miami, at $600 a square foot, compared with the $850 a square foot it might have asked a couple of years ago.

If Related and its partners hadn’t decided to lower prices, they probably would have had to wait until the next cycle to start construction, Mr. Rosso said. The project launched two months ago and Related has sold about 70 units out of 350 so far.

“It’s a marathon and it’s not a 100-meter chase,” he said. “This is the part of the marathon where we are running a little bit slower.”

Other Miami developers have put on hold or canceled more than half a dozen projects planned earlier in the cycle, from the Ion East Edgewater, a 35-story tower planned by a local Florida development firm, to Krystal Tower, a downtown tower planned by a Brazilian developer, according to consulting firm Integra Realty Resources Miami. Overall, the pipeline of units in active projects in Miami has shriveled by 42%, according to a report released a month ago by Integra.

At the Aurora, a new 61-unit building off the Miami waterfront, the developer is offering buyers a free membership to JetSmarter, a service that allows members to use shared private jets for free.

Tim Lobanov, managing director of Verzasca Group, which is developing the building, said the perk has a retail value of about $12,000 and is part of the project’s pitch to appeal to New Yorkers. JetSmarter offers flights several times a week from New York to southern Florida.

The south Florida condo market is especially vulnerable to swings in the global economy because developers rely heavily on foreign buying, particularly South Americans, Russians, Europeans and Canadians.

Foreign investors have pulled back as the value of their currencies has dropped versus the dollar. Brazilians, for example, have seen the value of their currency against the dollar slip nearly 42% since 2014, while Argentines have seen their purchasing power in the U.S. decline more than 40%, according to Integra Realty Resources.

Miami developers said they are seeing increased demand from New Yorkers and Chinese buyers looking to buy second homes, but that is unlikely to replace the sharp drop in demand from South Americans.

“The depth of the Chinese market, or the European or Canadian market, is not enough to make up for the South American buyer,” said Anthony Graziano, senior managing director at Integra.

‘I don’t see this as the bloodbath that we had last go around at all.’—Gil Dezer

While people across the industry acknowledge the market is slowing, they say low debt levels and a slowdown in new projects will prevent the massive oversupply they saw during the last bust.

“I don’t see this as the bloodbath that we had last go around at all,” said Gil Dezer, president of Dezer Development, builder of high-end Miami condos such as the Residences by Armani Casa, which has seen sales volume plunge to six a month from 20.

Overall, about 1,200 condo units in Miami were delivered last year, down from the peak of 10,000 units in 2008, according to Integra. But with more than 7,300 units under construction, inventory is expected to increase.

Most Miami developers have protected themselves by taking a page from the South American markets. Many now require buyers to pay a 50% deposit on the total cost of their units by the time the project breaks ground. Developers don’t break ground until the project is 80% sold, which means the deposits are enough to cover a significant portion of the construction costs. During the last cycle, by contrast, developers required only 20% deposits and allowed buyers to flip their units while they were still in contract.

Related and a few other developers have since loosened their deposit requirements to 30% from 50% to spur more deals. Mr. Rosso said Related does that only when it already has secured a construction loan and doesn’t need the additional deposits to cover building costs because the building is 80% sold.

Still, Mr. Rosso said the company doesn’t anticipate breaking ground on many new projects in Miami in the next couple of years and instead will be focusing on projects in places like Argentina and Mexico.

“A big part of the cycle is understanding when it’s time to launch new jobs and when it’s time to sell what you have,” he said.

No comments:

Post a Comment

Our Mission

Citizens for Sarasota County is a new coalition to promote ethical, responsive government that preserves and enhances Sarasota's unique natural environment and cultural heritage while building a sound local economy based on effective stewardship and innovation. Facebook conversation here.